LTC Bullet: Covid and Nursing Home Deaths

Friday, June 26, 2020


LTC Comment: The Heartland Institute recorded a podcast with Steve Moses concerning “Covid and Nursing Home Deaths.” A transcript follows after the ***news.***

*** DEBT CLOCK: The U.S. national debt is 26 trillion, 258 billion dollars, fully one quarter of a trillion dollars higher than it was when we published our last LTC Bullet two weeks ago. In that time, total unfunded liabilities jumped nearly $5 trillion. Every citizen owes $79,588 and every taxpayer owes $211, 222. We’re in a financial sinkhole, but the politicians just keep digging. What will happen if we stay on this course? Stay tuned. ***

*** THE MEDICAID TRAP remains where most people end up if they have a big long-term care expense and they’ve failed to prepare to pay privately. What’s changed recently is how serious the outcome of ending up on Medicaid for long-term care really is. That’s the topic of the following podcast and of “Nursing Homes, Coronavirus, and Medicaid,” my June 1st Wall Street Journal op-ed with Brian Blase. If you’re in the business of helping people prepare for future long-term care liability, you owe it to your prospects and clients to warn them about this added risk of failure to prepare. To overcome their denial and procrastination, you need facts and arguments. You’ll find them in our LTC Bullets, LTC E-Alerts, and LTC Clippings. Join the Center for Long-Term Care Reform and we’ll keep you up to date constantly with the data, reports, and articles you need to wake people up and get them to take action. Join the Center here or contact Steve Moses at 425-891-3640 or It’s too late for most people to avoid the Medicaid trap, but it’s not too late for the people you can reach with this information. ***


LTC Comment: Following is the transcript of a podcast recorded with Steve Moses on June 23, 2020 regarding the impact of Covid-19 on nursing home deaths. We expect to have a link to the actual recording soon. Heartland’s Health Care News publication will have a related story. We’ll send you a link to that as well in a future LTC Bullet. For now, here’s the transcript.

Date for recording:  June 23

Time:  11am ET

Title:  Why Nursing Homes Have Failed to Protect the Elderly from COVID

Hello and welcome to the Heartland Daily Podcast.  I’m your host today, AnneMarie Schieber, managing editor of Health Care News. We now are learning that the pandemic in the U.S. has been a crisis for nursing homes. The Centers for Medicare and Medicaid Services reports of the 122,289 people who died from COVID-19, nearly 30 thousand lived in nursing homes…about 1 in 4. 

My guest today is not surprised. Stephen Moses is president of the Center for Longer-Term Care Reform and author of the new book, “Medicaid and Long Term Care.” 


     1  .  For most people, this is the first glimpse they have had of nursing home care in the U.S.  That it is substandard at best… Is that an accurate and fair assessment?

Yes, I’d say that statement is accurate and recognized by most economists and other analysts. Medicaid reimburses nursing homes only about 80 percent of the private-pay rate and often less than the cost of providing the care, according to the American Health Care Association. Consequently, nursing homes heavily dependent on Medicaid have difficulty hiring and retaining enough quality caregivers at the very low salaries they can afford to pay. Having inadequate caregiving staff is closely associated with lower care quality ratings.

     2.  How many seniors live in nursing homes and how many are covered by Medicaid?

Roughly 1.3 million people reside in America’s 15,600 nursing homes. Medicaid covers 62 percent of them for some or all of their bills. Medicaid residents tend to be long-stayers, so their low reimbursement rates touch a much higher proportion of nursing home patient days than their total numbers alone would imply.

     3.  How is it that such a large percentage of seniors are covered by Medicaid long term care?

You have to look way back in history to answer that question. As in third world countries, long-term care was provided largely by extended families in the U.S. for most of our history. In the 20th century, as people started living longer, the state and federal governments began offering cash benefits to the indigent. Old and frail citizens used that cash to pay for residential care as families became less able to provide full time home care. Mom and pop nursing homes flourished. By mid-century, government programs began providing residential care for the “medically needy,” that is people who weren’t poor except because of their high medical or long-term care costs. The commercial nursing home industry took off as a result.

In 1965, as part of the Great Society programs of Lyndon Johnson, Medicaid became the dominant long-term care payer. That’s when the problems plaguing the system today started. From the beginning, Medicaid paid only for nursing home care, but that benefit included room, board, laundry and related services. Anyone who wanted home care had to pay for it and the other services totally out of pocket. Medicaid long-term care eligibility was originally available to almost anyone who applied. Transferring assets to qualify was explicitly permitted until 1980. Since then elastic income and asset eligibility rules have allowed the middle class and affluent to qualify for what was originally intended to be a poverty program. There is literally no limit on income if your medical and long-term care costs are high enough. Assets are also practically unlimited with home equity exempt between $595,000 and $893,000. Many other resources are exempt with no dollar limit, such as a car, term life insurance, individual retirement accounts, one business including the capital and cash flow, personal belongings and home furnishings including heirlooms. Generous matching funds from the federal government encouraged state Medicaid programs to maximize their grants almost without limit. Naturally, Medicaid expenditures exploded.

From 1965 to the present, Medicaid has paid for the vast majority of all expensive long-term care. Few people plan to rely on Medicaid, but most end up there if and when they need high cost care for an extended period. The dynamic works like this. People don’t worry or plan for long-term care because Medicaid has always been there as the safety net for poor, rich and in between. Once they need expensive care, the path of least resistance is to qualify for Medicaid. That’s the only way to preserve wealth and heirs’ inheritances which makes the program’s access and quality downsides more tolerable. Thousands of elder law attorneys across the country use sophisticated legal techniques to qualify affluent clients while preserving enough “key money” to buy their way into the higher quality, lower-Medicaid-census facilities.

     4.  How much does Medicaid pay for long care and what should it reasonably cost?

According to Genworth’s 2019 cost of care survey, the average private-pay monthly nursing home cost for a semi-private room is $7,513, and $8,517 for a private room. Costs in expensive urban areas can easily be half again as much or even double. As Medicaid pays about 80 percent of the private pay rate, it would pay about $6,010 on average for a semi-private room. Medicaid would rarely if ever pay for a private room.

It is important to understand that most people on Medicaid have some sources of personal income, nearly always Social Security at least. Medicaid requires that all income except for a tiny personal needs allowance must be used to offset the program’s cost for their care. For example, a person with several thousands of dollars’ worth of income from Social Security, a private pension, an exempt business, etc. qualifies for Medicaid nursing home benefits because their income is less that the cost of the nursing home. But once on Medicaid, they must pay most of that income back to the nursing home reducing Medicaid’s liability. There are even cases where the Medicaid recipient’s income covers the entire cost of the care at the Medicaid rate. This is very important because it shows (1) that Medicaid recipients get a substantial discount on the cost of their care, (2) nursing homes end up with more low-pay Medicaid recipients and fewer higher-pay private patients which impairs their ability to provide quality care, and (3) state and federal Medicaid programs subsidize welfare dependency at the expense of nursing home providers’ financial viability.

     5.  Why do families want to subject their loved ones to long term care under Medicaid?

Medicaid is the only way to get long-term care for free or highly subsidized. People don’t worry about long-term care until it’s too late. At that point, the elder is usually very old, infirm and often demented. Adult children are making the decisions and they have a financial conflict of interest. Their choices: take Medicaid, put Mom or Dad in a nursing home, and preserve the estate for their inheritance. Or use the parents’ wealth to buy high quality home care or assisted living in the private market and end up with less for themselves or nothing. Medicaid planning attorneys assure their well-heeled clients (usually the “kids,” not the elders) not to worry about the horror stories regarding Medicaid nursing homes. They’ll hold back enough money to pay privately for a few months. Nursing homes are so strapped for revenue that they roll out the red carpet for private payers. This key money buys access to the best nursing homes with the fewest Medicaid beds. After a few months, the attorney flips the switch and, voila, Medicaid picks up the tab going forward. Tragically, poor people don’t have key money so they end up in the 100 percent Medicaid hellholes.

     6.  Tell us about market place for private long-term care and insurance for it,

I’ve often explained it this way: you can’t sell apples on one side of the street when they’re giving them away on the other. Easy access to Medicaid after the insurable event has occurred was the biggest obstacle to private long-term care insurance. But the federal government added insult to injury by artificially forcing interest rates to nearly zero making it impossible for insurance carriers to get adequate returns on their reserves. That forced the carriers to raise premiums which enraged policy holders and repelled future prospects. These government policies nearly destroyed the traditional long-term care insurance market, but the industry has adapted by offering so-called hybrid products that combine life insurance or annuities with a long-term care financing component. Still, private long-term care insurance of any kind will never become a major market until people can no longer ignore the risk, avoid the premiums, wait until they need long-term care and then shunt the liability off onto taxpayers.

7.  Let’s talk about solutions we’ve been hearing about. Congress is already talking about investigations.  I’d like to go over a few that have been mentioned so far

a.   Better oversight

Won’t work. As the saying goes, you can’t make a silk purse out of a sow’s ear. More oversight, regulations, and penalties without enhanced revenue will only tie caregivers in more paperwork knots. If you keep up the beatings, don’t expect morale to improve.

      b.  increasing Medicaid reimbursement

Won’t work. Low Medicaid reimbursement is a symptom, not the cause of the long-term care market’s malaise. Pump more money into it and all you’ll end up with is a more expensive welfare trap diverting more people and resources from the private sector into dependency on public assistance.

      c.     home care

Tried and failed. State and federal Medicaid programs have attempted for at least two decades to divert recipients from nursing homes to home care on the theory that home and community-based care saves money. It doesn’t and hasn’t. Total institutional and home care Medicaid costs have continued to increase year after year in every state. On average and across the society, home care delays but does not replace nursing home care. Home care is desirable. It is a worthy goal. But it does not save money.

So what would work? Stop discouraging responsible and early long-term care planning. Stop making Medicaid available to virtually everyone after expensive care is needed and when it’s too late to save, invest or insure for future care. Eliminate or vastly reduce Medicaid’s huge home equity exemption so that people who need long-term care but have insufficient income to pay for it can use reverse mortgages to purchase high-quality home care or assisted living of their choice. Enforce Medicaid’s estate recovery mandate and use some of the savings to educate the public about long-term care planning and to incentivize purchasing private LTC insurance.

      8.  What does Congress need to do?  What should individuals do to best prepare for long term care?

Congress should remove the perverse incentives in public policy that discourage responsible long-term care planning as I just described.

Individuals should wake up to the reality that to avoid Medicaid and its nursing home trap, they must plan early, and save, invest or insure so if and when they need extended, expensive long-term care, they can pay privately for it. Money talks and it opens doors to the best long-term care in the most desirable venue, usually one’s own home.

As bad as the long-term care tragedy is in America, the good news is that it would be easy to fix. If we stop doing what we’ve always done, we’ll get a different and better result.

[The interviewer ended the podcast with a couple questions about long-term care problems that occur in government-financed systems. Moses explained that such systems are highly prone to rationing and even euthanasia because they lack the kinds of incentives and moderating controls that are present in free markets.]